Can I Get Car Finance For A Private Sale?

Buying a car privately can snag you a great deal, but it also comes with its risks and limitations.

For example, when buying a vehicle directly from the owner rather than the dealership, you have limited car finance options.

There are some lenders who offer car finance for private car sales. However, the requirements, interest rates, and terms and conditions may differ from dealership finance.

Read our in-depth guide below to learn everything you need to know about private car finance 😀

Got a specific question? Why not jump to:

What is a private car sale?

A private car sale occurs when a vehicle is sold directly from one individual to another.

It is typically more informal than going through a dealership, offering buyers the chance to secure cheaper second-hand cars.

Sellers also find private sales easier too as the process is quicker, avoiding dealership evaluations or trade-in negotiations.

Unfortunately, the risks can be greater and you will need to tread with extra caution when considering private car sales. For example, the car may not be in the condition advertised, it may have outstanding finance, or it may even in extreme circumstances have been stolen.

For this reason, it is crucial to carry out an HPI check before buying a car from a private seller.

Types of financing for private sales

Compared to dealership finance, there are limited types of car finance options for private sales. You can either apply for a personal loan or hire purchase finance.

Personal loans

Personal loans are typically provided by banks or credit unions. However, they can also be offered by independent lenders.

With a good credit score, you’re more likely to secure  funding, often at a low interest rate. You can choose from secured or unsecured loans, depending on your preferences.

Secured loans require collateral (in this case your vehicle) which you risk losing if you don't keep up with payments, while unsecured loans rely solely on your creditworthiness for approval and doesn’t require any assets to be used as collateral by the lender.

Once approved, the money will be paid into your bank account, which you can then use to pay the seller.

With this type of car finance, you’ll get to enjoy full ownership of the car whilst you finish making the repayments.

Diagram to show how personal loans work

Hire Purchase (HP)

With hire purchase finance, you get funds from a specialist lender. You are required to pay monthly payments until the loan is complete.

The car will serve as collateral against the loan amount and can be repossessed if you default on any payments.

The lender will typically need detailed information about the seller and the car you plan to purchase. It is harder to get HP finance to fund private car sales as most lenders supply only dealership finance.

Diagram to show how hire purchase (HP) finance work

More car finance guides

Tips on getting car finance for private sale

Getting private car finance isn’t as simple as dealership finance. If you want to improve the chances of getting the finance you need, follow these useful tips:

Check your eligibility

Each lender has a set of requirements you need to meet to be accepted for a loan. First, they need to check your credit report to ensure you can afford the monthly repayments.

There may also be limitations when it comes to the age of the car or the mileage it has used.  Some lenders will finance cars that are up to five years old, while others are willing to cover vehicles that are up to 12 years old.

Read through the eligibility requirements prior to applying for finance for a private sale.

Get pre-approved

If you are going for a personal loan from the bank, it’s best to get a pre-approval first.

This step allows you to see how much you can borrow and the interest rate you’ll receive. It also provides peace of mind that you’ll be accepted and speeds up the application process.

Pre-purchase checks

Buying a car through a private sale is not as secure as buying from a dealership.

You don’t have the same level of protection and it could be highly risky for the lender to finance a private sale.

One way to ensure that the car is in good condition, is to have a trusted mechanic check it over for you. This helps identify any issues and make sure everything is in order before making the purchase.

It’s also worth checking online valuation sites to ensure you’re getting a good price, as well as carrying out a HPI check.

Compare interest rates

Your interest rate will depend on the length of the loan term, your credit rating, and the lender you choose.

A longer loan period will result in lower monthly payments, but higher overall interest in the long run.

Used cars from a private seller tend to attract high interest rates as they are considered riskier to finance.

Personal loans are also usually unsecured. As the car isn’t used as security, you will be charged a higher interest rate to repay the loan.

Private sale car finance requirements

Each lender will have different requirements when it comes to funding a private car sale. However, there are some general requirements to be aware of, which we’ve listed below.

Details of the vehicle's history

Prior to loaning you the money, the lender needs to know the vehicle is legally owned, and whether it’s been written off or stolen.

The seller should also share details about the car's age and mileage if required.

A full-service history is also useful. If they hesitate to share the complete vehicle history, they may not be a legitimate seller.

Outstanding car loan details

The seller needs to provide evidence that the car does not have any outstanding debt. Remember, you can carry out HPI check to confirm there is no finance owed.

If there is an amount of money left to pay on the car, that will need to be paid off before you can take out car finance.

To avoid complications, it's best to purchase a car that has no outstanding loans.

So, while you can get car finance for a private sale, there are limits and restrictions you need to be aware of.

Currently, Carmoola doesn’t offer private sale finance. Our fully online finance can only be used at approved dealerships.

With no impact on your credit score, check to see if you are eligible for our fast and easy finance now. You can also see exactly how it works before you apply.

With no impact on your credit score, check to see if you are eligible for our fast and easy finance now. You can also see exactly how it works before you apply.

FAQs About Private Sale Car Finance

Can I get car finance for a private sale?

Yes, some lenders in the UK offer car finance for private sales, though it's less common than financing for dealership purchases.

What are the requirements for private car finance?

Requirements can vary between lenders. Typically, you'd need proof of stable income, a good credit history, proof of address, and identity verification. The vehicle itself may need to meet certain criteria, such as age or mileage.

Is private car financing safe and reliable?

Private car financing can be safe and reliable if you choose a reputable lender. It's crucial to read the terms and conditions, understand the interest rates, and ensure there are no hidden fees.

How does private car finance work?

Private car finance typically works by the lender giving you a loan to purchase the car from a private seller. You then repay the lender in monthly installments over a specified period. The loan might be secured against the car, meaning the vehicle serves as collateral.

Are there any specific documents needed for private car financing?

Yes, besides standard documentation like proof of income and credit history, you may also need the car's details (make, model, mileage, VIN), a sale agreement from the seller, and a receipt of the transaction. Some lenders might require a vehicle inspection or valuation. Always check with the specific lender for their documentation requirements.